Brief Thematic: Our Needs… and more

In this briefing:

  1. Our Needs…
  2. Japan Short Interest – The Numb3rs
  3. KOSPI Short Interest and a Trading Strategy

1. Our Needs…

  • Nike: Nike is advancing its DTC efforts as it acquires a predictive analytics SaaS platform and launches a sneaker subscription service for kids.
  • Logistics: FedEx ends U.S. ground delivery with Amazon as USPS reports its first package volume decline in nearly a decade.
  • Lyft & Uber: The share prices of Lyft and Uber are each down 7% since reporting earnings last week on Lyft’s shocking news it is moving up its lock-up period to August 19 from September 24 and Uber’s mind-numbing net loss of $5.2B.

I don’t know about you but I’m starting to fear for my safety. Last weekend, we had the tragic mass shootings at a Walmart in El Paso, Texas and at a bar in Dayton, Ohio. Last week, the bodies of the triple murder fugitive teenagers from Port Alberni were discovered, and on Saturday morning the American financier and convicted sex offender Jeff Epstein was found dead in his prison cell. Closer to home, the Sea to Sky Gondola in Squamish, which we ride up nearly every weekend to picnic and go for a hike, became a crime scene on Saturday morning after someone sabotaged it by cutting the gondola cable, sending all 30 cable cars crashing to the ground. If that wasn’t scary enough, on Saturday afternoon when we were driving home from a family bike ride, we spotted a dozen policemen and a police boat facing off against a guy armed with a knife at Sunset Beach.

This all made me start to think about Maslow’s hierarchy of needs — specifically the second layer — which is our need for safety. It’s interesting as the customer capital side of the value pyramid actually corresponds to Maslow’s pyramid as the functional level is about meeting physiological and safety needs, the emotional level is about love/belonging and the psychological level is about meeting our self-actualization needs. One way companies are advancing up the customer capital side of the value pyramid is through launching subscription services. For example, Nike, which is advancing its DTC efforts with the acquisition of predictive analytics SaaS platform Celect, just launched a sneaker subscription service for kids called Nike Adventure Club. Likewise, Bloomingdale’s is launching “My List at Bloomingdale’s”, an apparel subscription rental service. And Disney just announced it is bundling its Disney+ streaming service with ESPN+ and ad-supported Hulu. Meanwhile, we saw developments from two companies that have built cult-like membership followings by capitalizing on our desire for self-actualization with Equinox announcing it will be entering the on-demand fitness streaming space this fall and WeWork preparing to file for its IPO as early as this week.

2. Japan Short Interest – The Numb3rs

The Japan Exchange Group (JPX) publishes a daily report that details the short sell activity by market participants. JPX aggregates broker short sell reports and discloses information such as the short sale positions and the names of the investors whose short sale positions reach 0.5% of the outstanding shares. Here is some information on short positions for the week ended 9 August.

The short notional in the market for the week ended 9 August is US$24.27bn with the largest short positions in Toyota Motor (7203 JP), Itochu Corp (8001 JP)Canon Inc (7751 JP), Taiyo Yuden (6976 JP) and Fast Retailing (9983 JP). Most shorted stocks as a percentage of free float are Taiyo Yuden (6976 JP), Amazia, Leopalace21 Corp (8848 JP) and Tokai Carbon (5301 JP)  while the stocks with the highest days to cover are Vital Ksk Holdings (3151 JP), Mirait Holdings (1417 JP), Katakura Industries (3001 JP) and Aruhi Corp (7198 JP)

The largest increases in short notional over the week were Sysmex Corp (6869 JP), Square Enix Holdings (9684 JP), Yamaha Corp (7951 JP) and Sumco Corp (3436 JP)  while shorts were covered in ZOZO Inc (3092 JP), Bandai Namco Holdings (7832 JP), Kakaku.Com Inc (2371 JP) and Toto Ltd (5332 JP)

Sectorally, new short positions were built in Healthcare and Materials, while shorts were covered in Consumer Discretionary and Financials.

3. KOSPI Short Interest and a Trading Strategy

Performance

The Korea Exchange (KRX) publishes outstanding short position data daily with a two day lag.

Current short notional on the KOSPI market is KRW 10,645bn (US$8.74bn) with the largest short notionals in Celltrion Inc (068270 KS), Samsung Electro Mechanics Co, Ltd. (009150 KS), Hyundai Motor Co (005380 KS) and Samsung Biologics Co., (207940 KS).

Stocks with the largest short percentage as a percentage of free float are Samsung Electro Mechanics Co, Ltd. (009150 KS), Netmarble Corporation (251270 KS), Doosan Infracore (042670 KS) and Samsung Biologics Co., (207940 KS).

We also take a look at how the short interest has evolved in a few large names over the last year and present a trading strategy based on short interest that could be incorporated into existing trading strategies.

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